QUESTION: 29

The capital stock of a corporation, its net assets and its share of stock are entirely different things... the value of one bears no fixed or necessary relation to the value of the other; because:

A share of common stock does not represent a share in the ownership of the assets of a business.
Share holders are only concerned with dividends
Only the corporation itself holds to all its assets and liabilities ... A thirsty shareholder of brewery cannot walk into "his" company and demand that a case of beer be charged to his equity account
Putting capital in stocks is somewhat a risky investment

Answer(s): A,C

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QUESTION: 30

When is the guideline merged and acquired company method most useful?

The initial value derived from the guideline merged and acquired company method, before adjustment for factors such as size of subject block and degree of marketability, is an indication of transaction prices of major ownership interest, usually controlling ownership interests.
When same acquisition target has different buyers both due to perception and reality
At the time of achieving synergies
In estimation of enterprise value

Answer(s): A

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QUESTION: 31

Control transaction valuation multiples (often called deal multiples or acquisition multiples or acquisition multiples) often use the following measures of returns in the denominator EXCEPT:

Revenues
Operating income available to invested capital [earning before interest and taxes (EBIT)]
Intangible book value
Discretionary earnings

Answer(s): C

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QUESTION: 32

In merger market valuation models:

We compare prices among similar companies, much like comparison shopping for a consumer item among similar retail stores
Corporations are not yellow pencils, quickly stacked and easily matched
Every M&A sale cannot be considered special or extraordinary
M & A market mostly evinces aberrations

Answer(s): A

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QUESTION: 29

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QUESTION: 31

QUESTION: 32

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